I took a course on Joyce’s Ulysses in college. There were sections dozens of pages long that the professor never covered because he had no idea what Joyce was talking about. When some one asked a question, the professor would completely change the subject, and the student would nod sheepishly and say without enthusiasm that he now understood. Students never admitted their obvious confusion because they were scared of being the one kid in the class too dumb to grasp this allegedly genius work. The professor spent his lectures repeatedly summarizing the few straightforward passages and using Joyce’s crude innuendo as a segway to flirt with a redhead who always sat in the first row. Everybody got A’s in a prestigious course on their resumes.
I never saw the meetings at AIG where they discussed their positions insuring exotic debt packages, but I imagine they were very similar to my Ulysses class. No one in that room could predict exactly how a CDO-squared would react to adverse market conditions, because no one in that room had any fucking clue what a CDO-squared was. None of the executives were dumb enough to admit that, though. The AIG executives had all studied in the same academic setting, and learned that if superiors didn’t understand the material, they only needed to give the superiors the illusion of understanding it themselves. Eventually, it created an environment where no one understood what the company was doing, and no one could afford to admit it. And we saw how that turned out.
